The World Bank Third Sustainable Livelihoods Project (P125232) REPORT NO.: RES33209 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THIRD SUSTAINABLE LIVELIHOODS PROJECT APPROVED ON JUNE 6, 2014 TO MINISTRY OF FINANCE SOCIAL, URBAN, RURAL AND RESILIENCE GLOBAL PRACTICE EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Bert Hofman Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager/Manager: Susan S. Shen Task Team Leader: Ingo Wiederhofer, Badamchimeg Dondog The World Bank Third Sustainable Livelihoods Project (P125232) ABBREVIATIONS AND ACRONYMS APA Annual Performance Assessment CD Country Director IBL Integrated Budget Law IDA International Development Association IP Implementation Progress LDF Local Development Fund LPO Local Project Officers MoF Ministry of Finance PBG Performance-Based Grant PDO Project Development Objective PIU Project Implementation Unit PSC Project Steering Committee SDC Swiss Agency for Development and Cooperation SLP3 Third Sustainable Livelihoods Project TF Trust Fund The World Bank Third Sustainable Livelihoods Project (P125232) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P125232 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 06-Jun-2014 31-Oct-2020 Organizations Borrower Responsible Agency Ministry of Finance Ministry of Finance Project Development Objective (PDO) Original PDO The PDO is to improve governance and community participation for the planning and delivery of priority investments in rural areas of Mongolia. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-54870 06-Jun-2014 30-Jan-2015 31-Jul-2015 31-Oct-2020 24.80 11.03 11.66 TF-A0794 31-Jul-2015 31-Jul-2015 31-Jul-2015 30-Jun-2018 3.29 2.23 1.06 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Third Sustainable Livelihoods Project (P125232) Note to Task Teams: End of system generated content, document is editable from here. The World Bank Third Sustainable Livelihoods Project (P125232) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Summary of Proposed Changes 1. The Swiss Agency for Development and Cooperation (SDC) confirmed an extension of the closing date of its grant financing in support of the SLP III until December 31, 2019 through an amendment to the Administrative Agreement between the SDC and the World Bank dated March 27, 2017. In line with this, the Government and the Bank needs to revise the current closing date of June 30, 2018 of the Grant Agreement between the Government and the World Bank to June 30, 2019. Considering the current and the expected progress made by the project, and the recent extension of the IDA credit financing closing date, SDC will consider the opportunity to extend the closing date of the SDC funding to align it fully with the revised closing date of the IDA financing (October 31, 2020) by the end of the year. 2. The above-referenced amendment to the Administrative Agreement reduced the originally indicated SDC grant co- financing to the project from USD 11 million to USD 6 million, which had been transferred to the Bank in two installments (USD 3.5 million and USD 2.5 million) prior to the date of the amendment. The Bank signed a Grant Agreement with the Government on July 31, 2015, for the amount associated with the first installment, and needs to increase the amount of the co-financing available to the project up to the total of USD 5.665 million (after TF fees of 5 percent and set-up costs of USD 35,000). 3. Therefore, this restructuring paper seeks approval from the Country Director (CD) for the following proposed changes: (i) an extension of the closing date of the SDC grant co-financing to June 30, 2019; and (ii) an increase of the financing amount available to the project from the SDC grant co-financing to a total of USD 5.665 million. The proposed changes do not affect the PDO or the safeguard category for the Project. Therefore, a level two restructuring is recommended. B. Project Status and Rationale for Restructuring 4. Following completion of a restructuring of the main IDA financing of the project in September 2017, the project has continued to make encouraging implementation progress. The most recent ISR for the project documented the favorable progress through an upgrade of the project IP and PDO ratings to Moderately Satisfactory (MS). 5. The team also takes a favorable note of the recent appointment of the State Secretary of the Ministry of Finance (MOF) as the Head of the Project Steering Committee (PSC) for SLP3, which signals high level management commitment to the project going forward. 6. The SDC grant co-financing of the project primarily finances capacity building activities including under the project (Component 1), the Annual Performance Assessment (APA) of soums, and specialized studies on Monitoring and Evaluation including the Baseline Study (Component 3). There has been steady progress made in all these areas as summarized below:  LDF regulatory framework: Efforts to revise the LDF-related regulation and guidance (#244 and #43) are at an advanced stage. Building on the joint discussions of the draft regulation held during the recent implementation support mission, the PIU/MOF has produced a revised draft of the regulation and organized two rounds of roundtable discussions in May 2018 with the relevant stakeholders including practitioners of LDF implementation at the aimag and soum levels, the donors and institutions involved in the country’s decentralization and citizens participation efforts, etc. MOF is currently proceeding through the normal review and approval processes for The World Bank Third Sustainable Livelihoods Project (P125232) signature of the revised regulations. Once approved, the project will support efforts to widely disseminate the regulation and finalize the detailed how-to guidelines (currently in progress for drafting) that would provide further guidance for the local authorities on how to apply the regulation and the guidelines.  Annual Performance Assessments (APA) : The Project Implementation Unit (PIU) produced a comprehensive comparative report on the 2016 and 2017 APA results as well as APA results profiles for each aimag and has shared the report with the Local Program Officers (LPOs) for further dissemination to the aimag and soum officials. The average APA score of all soums increased from 32% in 2016 to 37% in 2017. In order to help further improve the scores, LPOs have led a pre-APA capacity building roadshow in all 330 soums in the months of April and May 2018. The 2018 APA is on track the field work planned in June and all assessments are completed and quality assured by August, in time to inform budget allocations on the Performance Based Grants (PBGs) for 2019.  Local capacity building and related communications: In the past 6 months, the project has carryied out numerous capacity building activities/events including: A3 procurement certificate training for over 1,000 representatives of local authorities, CSOs and citizens; training for 1,043 local treasury and budget officials on the latest updates and information on the key fiscal and treasury matters; community participation pilots led by the authorities of the selected 12 soums); training for the LPOs on social accountability; etc.  The PIU has overseen completion of a baseline survey, which has provided key reference points for a number of indicators of the Results Framework. Currently, the project is preparing to commission a technical audit of the LDF. 7. The current disbursement of the SDC grant co-financing for the project stands at USD 2,226,811.71 (68% of the USD 3,290,000 as per the current grant agreement). Given the recent uptake and the expected further acceleration following the approval of the revised LDF regulation and the detailed guidelines under development, the project plans to make further use of the additional funding in the coming months to contribute to the project PDO. II. DESCRIPTION OF PROPOSED CHANGES 8. In order to successfully carry out all of the planned project activities, the borrower has proposed to extend the closing date of the SDC grant co-financing to the project until June 30, 2019. 9. The proposed restructuring will also make available to the project the remaining funds associated with the second installment of the SDC grant co-financing to the project. III. SUMMARY OF CHANGES Changed Not Changed Change in Loan Closing Date(s) ✔ The World Bank Third Sustainable Livelihoods Project (P125232) Change in Implementing Agency ✔ Change in DDO Status ✔ Change in Project's Development Objectives ✔ Change in Results Framework ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Procurement ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ Change in Economic and Financial Analysis ✔ Change in Technical Analysis ✔ Change in Social Analysis ✔ Change in Environmental Analysis ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-54870 Effective 31-Dec-2018 31-Oct-2020 The World Bank Third Sustainable Livelihoods Project (P125232) TF-A0794 Effective 30-Jun-2018 30-Jun-2019 30-Oct-2019 Note to Task Teams: End of system generated content, document is editable from here.